Next says UK consumer outlook improving as shares hit record

By James Davey

LONDON (Reuters) -Prospects for Britain's consumers are the brightest since before the pandemic, clothing retailer Next said on Thursday, helping its shares to a record high after it posted a 5% rise in annual profits and kept its guidance for the current year.

"We're not negative about the consumer outlook, it's a first for us for some time," CEO Simon Wolfson told Reuters in an interview.

Positives included wages rising faster than prices and zero inflation in the group's own products, he said.

Risk factors were a weakening jobs market and consumers having to renegotiate mortgages at higher rates.

Shares in Next, whose stores on major shopping streets across the country make it a bellwether of UK consumer confidence, were up 4.7% in morning trade, extending gains over the last year to 30.8%.

Next had cautioned in January that sales growth would likely moderate if disruption to shipments through the Suez Canal, due to attacks by Iran-aligned Yemeni Houthi militants in the Red Sea, continued through 2024.

But on Thursday it said it did not expect a major hit.

Although average transit times had risen by seven to ten days, the company said its product teams had adjusted contract bookings to account for the delay.

"In addition, higher freight costs have been factored into our prices going forward but we still anticipate that our prices will fall," it said, pointing to easing factory gate prices.

Selling prices on like-for-like goods were currently down 2.0% versus last year and it expected deflation of 0.5% in the second half.

Next said it still expected a profit before tax and one-off items of 960 million pounds ($1.23 billion) in 2024-25, with full-price sales up 2.5%.

For the year ended Jan. 27 it made a profit on the same basis of 918 million pounds, versus guidance of 915 million pounds, on total sales up 5.9% to 5.84 billion pounds.

Next forecast a 5% rise in full price sales in its first quarter year-on-year, followed by a flat second quarter when comparative numbers are tougher.

($1 = 0.7817 pounds)

(Reporting by James DaveyEditing by Sarah Young and Mark Potter)